Residential and Investment

Buying your first home

There is much to consider and plenty to research. Firstly you need to work out how much you can borrow. This is where our services will really help you. Make sure you have an accurate and detailed budget that takes into account all expenses associated with purchasing a property including stamp duty, council rates and other fees. We can help you identify these extra costs. Use our budget planner to get a realistic picture of where your money goes now. Use our loan calculator to estimate your repayments.

Many first home owners forget to budget for things they haven’t been used to paying for themselves like electricity, water and other utilities and for items such as insurances.

Budget for maintenance and even simple things like stocking up the fridge and pantry for the first time – many of the things we take for granted when living at home.

Ensure you go to many open inspections and do your research on the internet before purchasing to ensure you have a good indication on property prices in your desired location. If you find that you cannot afford to buy your dream home in your desired location consider adjacent suburbs that may be more affordable.

First home owner grant

The First Home Owner Grant (the Grant) scheme was established to encourage and assist home ownership and to offset the effect of the GST on home ownership. The Grant is not means-tested nor is it restricted by the price of the property for contracts entered into prior to 1 January 2010.

For contracts entered into on or after 1 January 2010, the Grant will only be payable where the price of the property or construction of the home does not exceed $750,000. An exception to this requirement is where the contract relates to a home that is on, or to be built on, primary production land.

The SRO administers the Grant with the help of a number of banks and lending institutions that are approved agents. For contracts entered into on or after 1 July 2013, eligibility for the Grant will be limited to buyers of new homes.

How much is the grant?

For contracts entered into on or after 1 July 2013 to build or purchase a new home, a payment of up to $10,000 is available for eligible first home buyers. For contracts entered into prior to 1 July 2013, a payment of up to $7000 is available for eligible first home buyers.

First home saver accounts

If you:

  • are aged between 18 and 65,
  • have not previously purchased or built a first home in which to live,
  • do not have or have not previously had a first home saver account, and
  • provide your tax file number to the provider

This account provides a simple tax effective way for Australians to save for their first home through a combination of Government contributions and lower taxes. The Government will contribute 17% on the first $5,000 (indexed) of individual contributions made each year. This means an individual contributing $5,000 will receive a Government contribution of $850.

Stamp duty concessions

When you buy a home in Australia, the government imposes a stamp duty tax. This tax is added to the purchase price of your home and is assessed on the sale price of the property. Stamp duty and concessions vary from state to state. First home buyers may be eligible for rebates in the form of stamp duty rebates or exemptions. We will assist you to calculate your stamp duty if applicable.

Investors

Buying your next home

Property has been considered a popular path to wealth for Australians for many years. Buying their own home is often the first significant investment most people make.

Purchasing another property may well be the second – even before shares and other assets. However your first investment in property need not be your home. Buying a rental property can be a good way to gain capital growth that can be used later to help buy your own home. Sensible investments in property have many attractions. Property can be less volatile than shares and it tends to be regarded as a safe haven when other assets are declining in value.

Property has the potential to generate capital growth (an increase in the value of your asset) as well as rental income. There are also tax advantages associated with negative gearing.

Buying real estate, whether you are buying the family home or an investment, is one of life’s most important financial decisions. However, when buying an investment property, it is wise to remember that you are making a business decision. You are not buying from the heart, but from the head. You are buying the property because you expect it to appreciate in value and give you a financial return.

Use the equity

Many Australians are now tapping into their “pot of gold” – the equity in their home – allowing them to invest for the future and forge ahead financially.

Tapping into your home equity (or equity from another investment property), is a great launching platform for buying an investment property. Say your home is valued at $500,000, you owe $150,000 on your mortgage (thereby giving you equity of $350,000) you may want to invest a portion of the equity into another property.

Usually the existing loan and the new portion of the loan would be refinanced, however it is common to split these in order to keep the non tax deductible amount clearly differentiated from the deductible investment amount. Your accountant should be able to help with this.

The tax man (through tax rebates) and your tenants (through rent) help pay for the investment loan, however sometimes there is a shortfall that needs to be serviced. This should be taken into account when borrowing to ensure that the loan on the investment property can be serviced within your budget and should include some margin for any unexpected interest rate rises.

Then all you need to do is sit back and let the property take its course with capital gains generating some additional equity over the next seven to ten years as it has proved to do so (even in tough times) over the last century.

Once you learn this strategy you can repeat it as often as you want, provided you can repay the borrowings.

The decisions today

Australia currently faces a chronic housing shortage which, coupled with a rapidly expanding population (through natural increase and immigration), has pushed rental vacancy rates to historic lows and put upward pressure on rents. There are simply not enough houses to go around.

An investment plan is one that works towards building your wealth and securing your financial freedom. For some, the future may seem a long way off, but the time to act is now because the future waits for no one. The housing market is generally a seven to ten year cycle: there are always highs, lows and steady patches.

The decisions you make today will determine the lifestyle choices you have in the future. The following factors should be taken into consideration when purchasing property as an investment:

  • The likely return – yield and capital growth
  • Buying and selling costs
  • Cost to borrow money, ie interest rates
  • How attractive the property will be for likely tenants or future buyers

Types Of Residential Finance

Standard variable rate loans

These loans are the most common type available. The variable rate loan offers more features and flexibility than the basic or “no frills” loan, so the rate is usually slightly higher. The extra options (for example a redraw facility, the option to split between fixed and variable, extra repayments and portability) should be taken into account when choosing your type of variable loan. Repayments will vary as interest rates fluctuate.

Fixed rate loans

These loans are set at a fixed interest rate for a specified period (usually one to five years). The advantage of allowing you to organise your finances and repayments without the risk of rising interest rates is offset by the disadvantage of not benefiting from a drop in rates. At the end of the term all fixed loans automatically revert to the applicable variable rate. At this stage you have the option to lock in another fixed rate for a new term, switch to variable or go for a loan where you split with a percentage fixed and the remainder variable. However these loans may have limited features and lack the flexibility of 100% variable loans. There may be early exit fees and limited ability to make extra payments.

Construction loans

If you’re building a new home or planning major renovations to your existing home, a construction loan is generally the most appropriate funding option. The difference between a construction loan and other types of loans is that a construction loan is drawn down in stages and not paid as a lump sum. The draw downs enable the builder of a home to finance the various stages of the construction process from the acquisition of land to the various stages of building.

Professional home loan packages

These loans are offered to provide an all-in-one home loan package. They offer interest rate and fee savings on your home loan, credit card and transaction accounts. Some lenders also waive the annual fees for your credit cards. An annual fee ranging from $120 to $395 is usually applicable on these loans. Professional packages can also offer amazing flexibility, with some lending institutions willing to waive product switching fees when changing from a variable to a fixed rate or converting a principal and interest type loan to an interest only loan.

Low doc and no doc loans

Low doc and no doc loans were created to cater for the self employed or small business owners who are unable to prove their income. There is usually limited documentation required for this type of application and the interest rates are typically higher as the lending institution are taking more risk by lending finance without normal evidence. Clients are required to complete a declaration that they can afford the repayments. Variable or fixed rates are available for these loans.

Debt consolidation and financing

Debt consolidation is a process where all of your debts are rolled together into a single loan.

Debt from personal loans and credit cards can be incorporated into your mortgage at a much better interest rate as home loans tend to have lower interest rates than other forms of credit. Consolidation will reduce your interest rate overall, and in this way save you money. Consolidation of your debt into your existing mortgage is most effective for larger amounts of money and should reduce the amount of your monthly payment. It also has the advantage of only having to make one payment per month.

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